A MELBOURNE-BASED stockbroking firm has collapsed, and the accounts of more than 3000 clients have been frozen.
The Sonray Capital Markets group, that made a name for itself in the booming but controversial market for derivative trading instruments, ceased trading yesterday after appointing Ferrier Hodgson as administrator late on Tuesday, The Australian reported.
While it is not yet clear how much money is tied up in the suspended accounts, clients are understood to be mostly retail investors, including retirees who manage their own superannuation funds.
Ferrier Hodgson is investigating the circumstances of the collapse and will confer with the Australian Securities & Investments Commission as soon as possible.
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Sonray, founded in 2003 by securities and derivatives specialist Russell Johnson and his brother-in-law, Scott Murray, joins a growing list of financial services outfits that have collapsed since the onset of the global financial crisis, including Opes Prime Group, Chimaera and Lift Capital.
According to Sonray's website, the firm specialised in online and advisory services in global equities, futures and foreign exchange.
It also claims to be one of the first companies in Australia to offer contracts for difference, or CFDs, which have grown in popularity in recent years but have also been the subject of regulatory concerns worldwide due to the risks posed to unsophisticated investors.
Mr Johnson, according to his resume, had extensive experience advising in global securities and derivatives for leading broking houses such as Merrill Lynch and Bell Commodities.
The 38-year-old, who is Sonray's sole director, and his brother-in-law built the firm into a 70-person operation with plush and expansive offices in Melbourne and the Gold Coast.
Mr Murray acts as Sonray's chief executive and is responsible for the firm's high net worth clients. His previous experience includes advising and trading futures and derivatives for Fimat and CMC Markets.
While Ferrier Hodgson has yet to ascertain the cause of the firm's failure, sources close to the group have claimed that recent attempts to expand into equities and corporate advisory might have been its undoing. Late last year, Sonray entered into a partnership with Europe's Saxo Bank to launch a new online trading platform.
Called SonrayTrader, the full-service proprietary trading platform offered investors a broad range of capital market products, including margin foreign exchange, CFDs in stocks listed on more than 20 international exchanges.
Plans were also under way to introduce the support for futures and cash stock trading.
"They grew too quickly, invested too quickly and were short of cashflow," the source said.
There has also been speculation that Sonray was negotiating with Saxo Bank regarding a possible equity injection or buy-out. However, those talks were reported to have collapsed.
Sonray's latest accounts show little sign of financial stress.
Although the firm posted a $1.5m loss for the 2009 financial year, as expenses of $10.5m outweighed $8.3m in revenue, it appeared to have no significant near-term liabilities, including to its two bankers HSBC and ANZ.
Although both banks declined to comment, it is understood ANZ's exposure to Sonray was less than $1m. The bank, which has provided a guarantee for a leased premises and a small overdraft facility, has a registered charge over the group.
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